Why The Geo Group Stock Tanked 15% in Early Trading Today
Shares of prison operator The Geo Group (NYSE: Geo) fell sharply at the open on Thursday, dropping as much as 15% in the first hour. By roughly 11 a.m. ET today, the stock had regained a little ground, but was still sitting with a 10% loss. The big news came out before the market opened, when the real estate investment trust (REIT) announced that a very material corporate change is on the horizon.
The Geo Group has decided to abandon the REIT structure and convert to a traditional C corporation. That's a major shift, given that REITs are legally required to pass 90% of taxable earnings on to shareholders and by so doing, avoid corporate-level taxation. There are other nuances, but the dividend's elimination is a big issue here. Basically, The Geo Group's balance sheet is heavily leveraged, and it plans to use the cash that would have gone to dividends to help reduce its debt.
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Source Fool.com
